The GAAP tax rate increased to 28% in the first quarter of 2015, from low levels in 2014

BUFFALO, N.Y., April 24, 2015 (GLOBE NEWSWIRE) -- First Niagara Financial Group, Inc. (Nasdaq:FNFG) today reported GAAP net income available to common shareholders of $43.8 million, or $0.12 per diluted share for the first quarter of 2015, compared to $52.7 million, or $0.15 per diluted share, for the quarter ended March 31, 2014. Excluding certain non-operating restructuring items incurred during the first quarter of 2015, operating net income available to common shareholders was $54.7 million, or $0.15 per diluted share, compared to $61.0 million, or $0.17 per diluted share in the year-ago quarter.

"Our first-quarter results demonstrate our strong core business fundamentals and the progress we are making to provide a faster, easier, simpler and more secure banking experience for our customers, which will drive increased value for our shareholders," said Gary M. Crosby, President and Chief Executive Officer. "We recently launched our new Online Deposit Account Opening solution which enables our customers to choose the products they want and open their accounts using their mobile, tablet or desktop devices. Early customer experience shows account opening rates that are two times greater than our previous experience."

In the first quarter of 2015, First Niagara reported GAAP net income available to common shareholders of $43.8 million, or $0.12 per diluted share, which included $11 million in after-tax restructuring expenses, or $0.03 per diluted share, incurred primarily in connection with previously announced branch consolidations and the Organizational Simplification initiative completed in the first quarter. Excluding non-operating items as detailed in the accompanying table, first quarter 2015 operating net income available to common shareholders was $54.7 million, or $0.15 per diluted share, compared to $0.15 per diluted share in the fourth quarter of 2014.

Compared to the prior quarter, average loans increased 4% annualized. Average commercial business and real estate loans increased 5% annualized over the prior quarter, driven by increases in commercial real estate volumes. Average consumer loans increased 2% annualized driven by increases in indirect auto and home equity balances. Average consumer interest-bearing and noninterest-bearing checking account balances increased 11% annualized to $5.2 billion, driven by higher balances held by customers as well as strong customer response to the Company's Simple Checking product launched in August 2014. Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking accounts currently represent 38% of the company's deposit balances, up from 36% a year ago.

Operating revenues were flat to the prior quarter, reflecting two less days in the first quarter and offset by the historic tax credit amortization which reduced noninterest income in the prior quarter. Net interest income decreased 3% in the first quarter compared to the prior quarter primarily driven by fewer days in the quarter, lower commercial real estate prepayment fees as well as continued impact of reinvestments and re-pricing of assets in the current low interest rate environment. Net interest margin was 3.07%, down 4 basis points from the prior quarter, in-line with the company's expectations. Noninterest income increased 7% from the prior quarter which included $11 million in historic tax credit (HTC) amortization. Excluding HTC amortization, noninterest income declined $6 million sequentially, reflecting moderation in capital markets income from record levels in the fourth quarter as well as normal seasonal declines in deposit service charges and merchant and card fees. In the first quarter, non-GAAP operating expenses were $244 million and declined $5 million from the prior quarter where strong expense management offset normal seasonal increases typical in the first quarter.

The provision for loan losses on originated loans totaled $11 million in the first quarter of 2015, compared to $31 million in the prior quarter. Net charge-offs equaled 0.31% of average originated loans, a decrease of 13 basis points from 0.44% in the fourth quarter. At March 31, 2015, originated criticized loans decreased 5% from the prior quarter. Nonperforming originated loans were $198 million, or 1.01% of originated loans, compared to 0.90% at the end of the prior quarter.

Average total loans increased 4% annualized from the prior quarter, driven by increases in the company's commercial real estate, indirect auto and home equity portfolios.

Average commercial loans, which include commercial business (C&I) and commercial real estate (CRE) loans, increased to $14.1 billion, or a 5% annualized increase from the prior quarter, driven by growth in commercial real estate volumes primarily in the Eastern Pennsylvania and New England markets. Average CRE loans increased 9% annualized to $8.3 billion. C&I loans averaged $5.8 billion and were relatively flat compared to the prior quarter given the company's focus on relationship pricing and prudent underwriting in the current competitive environment, and to a lesser extent principal pay-downs.

Average indirect auto loan balances increased 11% annualized or by $55 million to $2.2 billion as new originations were partially offset by increasing pay-downs. Indirect auto originations during the quarter moderated to $235 million driven by cold weather conditions which impacted car sales as well as the company's decision to be more selective on pricing. New originations in the first quarter yielded 3.25%, net of dealer reserve, an increase of 16 basis points compared to the prior quarter originations at a weighted average FICO score of 755. Average residential real estate loans decreased $26 million, or 3% annualized driven by increased prepayment of adjustable rate mortgages and the company's limited appetite for longer-duration mortgage assets. Home equity balances increased for the eighth consecutive quarter to $2.9 billion, or 4% annualized from the prior quarter reflecting higher customer draws and the benefits of promotional and cross-sell campaigns.

Deposits

Average consumer deposit balances increased 5% annualized from the prior quarter driven by higher customer balances, new account acquisitions and successful money market deposit promotional campaigns. This increase was offset by seasonal declines in business deposits as well as lower municipal and brokered time deposits.

Average consumer interest-bearing and noninterest-bearing checking account balances increased 11% annualized to $5.2 billion, driven by higher balances held by customers as well as strong customer response to the company's Simple Checking product launched in August 2014. A 21% annualized increase in average consumer noninterest-bearing checking deposit balances was more than offset by seasonal declines in business noninterest-bearing checking account balances, driving a 4% decrease in overall noninterest-bearing checking account balances. Total interest-bearing checking balances averaged $5.0 billion, a 4% annualized decrease from the prior quarter as an 8% increase in consumer interest-bearing checking balances was more than offset by decreases in municipal interest-bearing checking deposits.

Average transactional deposit balances, which include interest-bearing and noninterest-bearing checking accounts, decreased an annualized 4% over the prior quarter and currently represent 38% of the company's deposit balances, up from 36% a year ago.

The average cost of interest-bearing deposits increased 3 basis points to 0.28% from the prior quarter, reflecting the impact of promotional deposit campaigns to gather money market deposit balances as well as purchase accounting mark-to-market adjustments on maturing acquired certificate of deposits.

Net Interest Income

First quarter 2015 GAAP net interest income decreased $7 million or 3% from the prior quarter to $263 million. Approximately half of the sequential decline in net interest income was driven by two less days in the first quarter. The remainder of the decrease was driven by lower commercial real estate prepayment fees, deposit promotional pricing campaigns as well as the continued impact of reinvestments and re-pricing of assets in the current low interest rate environment. Average earning assets increased 4% annualized from the prior quarter, driven by growth in both loans and securities.

Net interest margin declined 4 basis points from the prior quarter to 3.07%, reflecting continued compression of earning asset yields in the current low interest rate environment, expiration of certain favorable purchase accounting marks on acquired certificate of deposits, as well as impact of deposit pricing promotional campaigns.

Credit Quality

At March 31, 2015, the allowance for loan losses was $231 million, compared to $234 million at December 31, 2014. Nonperforming assets were $247 million and comprised 0.63% of total assets, compared to $224 million or 0.58% of total assets at December 31, 2014. Total criticized loans decreased 4% from the prior quarter.

Information for both the originated and acquired portfolios follows.

Q1 2015

Q4 2014

$ in millions

Originated

Acquired

Total

Originated

Acquired

Total

Provision for loan losses*

$ 11.1

$ 3.0

$ 14.2

$ 31.0

$ 3.2

$ 34.2

Net charge-offs

15.0

2.3

17.3

21.0

1.7

22.7

NCOs/ Avg Loans

0.31%

0.25%

0.30%

0.44%

0.17%

0.40%

Total loans**

$ 19,529

$ 3,590

$ 23,118

$ 19,295

$ 3,742

$ 23,037

(*) Excludes provision for unfunded commitments of $(1.4) million and $1.5 million in 1Q15 and 4Q14, respectively

(**) Acquired loans before associated credit discount; see accompanying tables for further information

Originated loans

The provision for loan losses on originated loans totaled $11 million and decreased from $31 million in the fourth quarter of 2014 which included an $10 million provision toward one Western Pennsylvania credit serving the energy sector, a $5 million provision towards an unrelated commercial credit that the company exited in March 2015, and a $5 million provision to cover exposure to other borrowers servicing the energy sector following the recent fall in oil and gas prices.

Net charge-offs in the first quarter equaled $15 million or 31 basis points of average originated loans, compared to $21 million or 44 basis points in the prior quarter.

At March 31, 2015, nonperforming originated loans comprised 1.01% of originated loans, compared to 0.90% at December 31, 2014. This increase was driven by the addition of a few large and discrete commercial credits to nonperforming status and lower resolutions. The loss content related to the increased nonperforming loans is expected to be low because they are well-secured.

At March 31, 2015, the allowance for loan losses on originated loans totaled $224 million or 1.15% of such loans, compared to $228 million or 1.18% of such loans at December 31, 2014. This decline is primarily related to the first quarter charge-off of the commercial credit that the company exited in March but recorded the provision expense in the fourth quarter of 2014.

Acquired loans

The provision for losses on acquired loans totaled $3 million, relatively unchanged from the prior quarter. Net charge-offs on the acquired portfolio totaled $2 million during the quarter, also consistent with the prior period. At March 31, 2015, the allowance for loan losses on acquired loans totaled $7 million, compared to $6 million at December 31, 2014. Acquired nonperforming loans totaled $30 million, unchanged from the prior quarter. At March 31, 2015, remaining credit marks available to absorb losses on a pool-by-pool basis totaled $92 million.

Noninterest Income

First quarter 2015 noninterest income of $82 million increased 7% or $5 million compared to the prior quarter which included $11 million in historic tax credit amortization (HTC). Excluding the impact of HTC amortization in the fourth quarter, noninterest income decreased $6 million or 7% from the prior quarter driven by seasonally lower deposit service charges and merchant and card fees as well as moderation in capital markets revenues from record levels in the fourth quarter.

Capital markets income decreased $4 million sequentially reflecting lower derivative sales and volumes from exceptionally strong and record fourth quarter levels. Deposit service charges decreased $2 million or 10% from the prior quarter driven by seasonal patterns and lower NSF incident rates. Merchant and card fees declined 9% to $12 million reflecting normal seasonality and to a lesser extent severe winter weather.

Insurance commissions increased $1 million or 6% from the prior quarter, primarily driven by typical first quarter strength in renewal activity that was consistent with the prior year. Mortgage banking revenues increased modestly from the prior quarter driven by higher locked volumes and gain-on-sale margin. Wealth management services income increased 2% from the prior quarter to $15 million driven by stronger variable rate annuity and mutual fund sales.

Noninterest Expense

Excluding non-operating items in both quarters, expenses totaled $244 million in the first quarter of 2015, or $5 million lower than the fourth quarter of 2014. Reported first quarter expenses of $261 million included pre-tax restructuring charges of $18 million primarily related to severance and other expenses from previously announced branch consolidations and the Organizational Simplification initiative. Fourth quarter 2014 expenses totaled $234 million and included a benefit of $23 million related to reversal of reserves recognized to address a previously disclosed process issue related to certain customer deposit accounts as well as $9 million in restructuring charges.

Salaries and benefits expenses increased $1 million compared to the prior quarter as $4 million in lower salaries from lower headcount were offset by typical resetting of payroll taxes and other seasonal benefits expenses. On a year-over-year basis, salaries and benefits expenses decreased 5% driven by a 7% decline in headcount. Occupancy and equipment expense decreased $1 million due primarily to branch consolidations. Marketing and advertising expenses moderated $2 million from elevated fourth quarter levels. Professional services fees decreased $4 million from elevated professional fees incurred for other corporate activities in the fourth quarter of 2014.

In the first quarter of 2015, the operating efficiency ratio was 70.5%, compared to 71.5% in the prior quarter.

Effective Tax Rate

The effective tax rate, on a GAAP basis, was 28% in the first quarter, compared to 10% in the prior quarter, primarily reflecting the expiration of previously disclosed tax strategies.

Capital

At March 31, 2015, all regulatory capital ratios and amounts were calculated under the Basel III standardized transitional approach. The company's estimated consolidated Total Risk Based capital and Common Equity Tier 1 capital ratios were 12.0% and 8.5% respectively. At December 31, 2014, the comparable Total Risk Based and Tier 1 Common Equity ratios were 11.8% and 8.2%, respectively.

The company remains well above current regulatory guidelines for well-capitalized institutions.

About First Niagara

First Niagara, through its wholly owned subsidiary, First Niagara Bank, N.A., is a multi-state community-oriented bank with approximately 390 branches, $39 billion in assets, $28 billion in deposits, and approximately 5,300 employees providing financial services to individuals, families and businesses across New York, Pennsylvania, Connecticut and Massachusetts. For more information, visit www.firstniagara.com.

Investor Call

A conference call will be held at 8:30 a.m. Eastern Time on Friday, April 24, 2015 to discuss the company's financial results. Those wishing to participate in the call may dial toll-free 1-888-456-0351 with the passcode: FNFG. Presentation slides will be used during the earnings conference call and are available under the investor relations tab of our website at www.firstniagara.com. A replay of the call will be available until June 1, 2015 by dialing 1-800-937-2124, passcode: 42415.

Non-GAAP Measures - This news release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (GAAP). The company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the company, and facilitate investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, the company believes the exclusion of these non-operating items enables management to perform a more effective evaluation and comparison of the company's results and to assess performance in relation to the company's ongoing operations. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Where non-GAAP disclosures are used in this news release, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this document.

Forward-Looking Statements - This press release contains forward-looking statements with respect to the financial condition and results of operations of First Niagara Financial Group, Inc. including, without limitations, statements relating to the earnings outlook of the company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) execution risk associated with the announced investment plan; (7) regulatory approval to continue payment of common and preferred dividends.

(2) Net revenue is comprised of net interest income and noninterest income.

(3) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.

(4) Yields and rates calculated on a tax equivalent basis.

(5) Return used to calculate ratio excludes preferred stock dividend.

First Niagara Financial Group, Inc.

Period End Balance Sheet

(in thousands)

2015

2014

2013

March 31,

December 31,

September 30,

June 30,

March 31,

December 31,

Cash and cash equivalents

$ 387,676

$ 420,033

$ 451,313

$ 557,423

$ 503,070

$ 462,927

Investment securities:

Available for sale

5,911,419

5,915,338

6,198,140

6,683,914

7,060,237

7,423,162

Held to maturity

6,214,561

5,941,621

5,351,977

4,834,279

4,467,213

4,042,481

FHLB and FRB common stock

375,090

411,857

389,870

434,322

437,550

469,217

Total investment securities

12,501,070

12,268,816

11,939,987

11,952,515

11,965,000

11,934,860

Loans held for sale

48,755

39,825

31,245

45,446

34,465

50,137

Loans and leases:

Commercial:

Real estate

8,287,108

8,204,027

8,013,622

7,940,977

7,867,724

7,777,903

Business

5,790,980

5,775,413

5,836,235

5,741,684

5,470,177

5,290,392

Total commercial loans

14,078,088

13,979,440

13,849,857

13,682,661

13,337,901

13,068,295

Consumer:

Residential real estate

3,330,216

3,353,081

3,360,805

3,358,347

3,389,071

3,447,997

Home equity

2,943,844

2,936,123

2,886,655

2,835,421

2,767,024

2,752,229

Indirect auto

2,200,913

2,166,320

2,073,843

1,871,688

1,655,489

1,543,983

Credit cards

301,228

324,113

312,549

311,640

305,663

325,140

Other consumer

263,985

278,305

286,140

286,062

295,692

302,009

Total consumer loans

9,040,186

9,057,942

8,919,992

8,663,158

8,412,939

8,371,358

Total loans and leases

23,118,274

23,037,382

22,769,849

22,345,819

21,750,840

21,439,653

Allowance for loan losses

231,138

234,251

222,753

219,426

213,937

209,274

Loans and leases, net

22,887,136

22,803,131

22,547,096

22,126,393

21,536,903

21,230,379

Bank owned life insurance

428,454

426,192

423,376

420,230

417,031

415,205

Goodwill and other intangibles

1,410,800

1,417,005

1,423,437

2,528,481

2,535,271

2,542,783

Other assets

1,243,588

1,176,036

1,155,588

997,120

999,469

992,071

Total assets

$ 38,907,479

$ 38,551,038

$ 37,972,042

$ 38,627,608

$ 37,991,209

$ 37,628,362

Deposits:

Savings accounts

$ 3,488,441

$ 3,451,616

$ 3,458,661

$ 3,626,750

$ 3,664,765

$ 3,666,759

Interest-bearing checking

5,158,264

5,084,456

5,055,458

4,743,684

4,929,302

4,743,829

Money market deposits

10,368,358

9,962,220

9,894,346

9,834,344

10,106,569

9,739,539

Noninterest-bearing deposits

5,500,484

5,407,382

5,308,736

5,284,037

5,101,681

4,865,873

Certificates of deposit

3,734,226

3,875,563

3,952,879

3,955,754

3,795,438

3,649,257

Total deposits

28,249,773

27,781,237

27,670,080

27,444,569

27,597,755

26,665,257

Short-term borrowings

4,739,264

5,471,974

4,928,762

4,890,343

4,137,496

4,822,222

Long-term borrowings

1,233,550

733,620

733,684

733,337

733,384

733,883

Other liabilities

559,646

471,449

543,813

477,685

495,589

413,647

Total liabilities

34,782,233

34,458,280

33,876,339

33,545,934

32,964,224

32,635,009

Preferred stockholders' equity

338,002

338,002

338,002

338,002

338,002

338,002

Common stockholders' equity

3,787,244

3,754,756

3,757,701

4,743,672

4,688,983

4,655,351

Total stockholders' equity

4,125,246

4,092,758

4,095,703

5,081,674

5,026,985

4,993,353

Total liabilities and stockholders' equity

$ 38,907,479

$ 38,551,038

$ 37,972,042

$ 38,627,608

$ 37,991,209

$ 37,628,362

Selected balance sheet information:

Total interest-earning assets(1)

$ 35,594,208

$ 35,310,447

$ 34,720,650

$ 34,305,451

$ 33,684,828

$ 33,396,058

Total interest-bearing liabilities

28,722,103

28,579,449

28,023,790

27,784,211

27,366,955

27,355,489

Net interest-earning assets

$ 6,872,105

$ 6,730,998

$ 6,696,860

$ 6,521,240

$ 6,317,873

$ 6,040,569

Tangible common equity(1)(2)

$ 2,376,444

$ 2,337,751

$ 2,334,263

$ 2,215,191

$ 2,153,712

$ 2,112,568

Unrealized gain on available for sale securities, net of tax(3)

68,194

52,244

55,052

86,244

72,579

63,930

Total core deposits

$ 24,515,547

$ 23,905,674

$ 23,717,201

$ 23,488,815

$ 23,802,317

$ 23,016,000

Originated loans(4)

$ 19,528,609

$ 19,295,553

$ 18,841,896

$ 18,196,302

$ 17,388,542

$ 16,922,161

Acquired loans(5)

3,681,354

3,834,931

4,028,091

4,254,750

4,475,593

4,642,775

Credit related discount on acquired loans(6)

(91,689)

(93,102)

(100,138)

(105,233)

(113,295)

(125,283)

Total Loans

$ 23,118,274

$ 23,037,382

$ 22,769,849

$ 22,345,819

$ 21,750,840

$ 21,439,653

(1) Includes interest bearing cash and cash equivalents, investment securities at amortized cost, loans held for sale, and total loans and leases.

(2) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.

(3) Excludes unamortized unrealized gains recorded in accumulated other comprehensive income related to available for sale securities transferred to held to maturity.

(4) Originated loans represent total loans excluding acquired loans.

(5) Carrying value of acquired loans plus the principal not expected to be collected.

(6) Principal on acquired loans not expected to be collected.

First Niagara Financial Group, Inc.

Average Balance Sheet and Related Tax Equivalent Yields & Rates

(in millions)

For the three months ended

March 31, 2015

December 31, 2014

March 31, 2014

Average

Interest(1)

Yields

Average

Interest(1)

Yields

Average

Interest(1)

Yields

Balances

and

Balances

and

Balances

and

Rates(1)

Rates(1)

Rates(1)

Interest-earning assets:

Loans and leases(2)

Commercial:

Real estate

$ 8,263

$ 74

3.60%

$ 8,087

$ 76

3.68%

$ 7,801

$ 76

3.89%

Business

5,797

50

3.43

5,791

51

3.43

5,413

48

3.56

Total commercial loans

14,060

124

3.53

13,878

127

3.58

13,214

124

3.76

Consumer:

Residential real estate

3,338

32

3.78

3,364

32

3.79

3,416

33

3.88

Home equity

2,939

28

3.91

2,912

29

3.94

2,756

28

4.12

Indirect auto

2,187

15

2.79

2,132

15

2.82

1,613

12

2.93

Credit cards

311

9

11.74

314

9

11.47

314

9

11.64

Other consumer

275

6

8.49

283

6

8.47

300

6

8.64

Total consumer loans

9,050

90

4.02

9,005

91

4.01

8,399

88

4.26

Total loans and leases

23,110

214

3.75

22,883

218

3.78

21,613

212

3.98

Residential MBS

7,180

45

2.49

6,892

43

2.51

5,689

39

2.75

Commercial MBS

1,404

11

3.26

1,512

13

3.37

1,697

14

3.28

Other investment securities (3)

3,554

31

3.52

3,585

32

3.59

4,388

39

3.55

Total securities, at amortized cost

12,138

87

2.88

11,989

88

2.94

11,774

92

3.12

Money market and other investments

158

--

1.01

161

--

1.21

125

1

1.64

Total interest-earning assets

35,406

$ 302

3.45%

35,033

$ 307

3.47%

33,512

$ 305

3.69%

Goodwill and other intangibles

1,414

1,420

2,539

Other noninterest-earning assets

1,887

1,865

1,697

Total assets

$ 38,707

$ 38,318

$ 37,748

Interest-bearing liabilities:

Deposits

Savings accounts

$ 3,432

$ --

0.08%

$ 3,447

$ 1

0.09%

$ 3,631

$ 1

0.08%

Interest-bearing checking

5,001

--

0.03

5,049

--

0.03

4,735

--

0.03

Money market deposits

10,132

7

0.26

10,037

6

0.24

9,887

5

0.20

Certificates of deposit

3,778

8

0.84

3,888

7

0.72

3,647

6

0.70

Total interest bearing deposits

22,343

15

0.28%

22,421

14

0.25%

21,900

12

0.23%

Borrowings

Short-term borrowings

5,125

6

0.46%

4,917

5

0.43%

4,642

5

0.44%

Long-term borrowings

1,027

13

4.98

734

12

6.56

734

12

6.69

Total borrowings

6,152

19

1.21

5,651

17

1.23

5,376

17

1.29

Total interest-bearing liabilities

28,495

$ 34

0.48%

28,072

$ 31

0.45%

27,276

$ 29

0.44%

Noninterest-bearing deposits

5,430

5,485

4,864

Other noninterest-bearing liabilities

654

620

574

Total liabilities

34,579

34,177

32,714

Total stockholders' equity

4,128

4,141

5,034

Total liabilities and stockholders' equity

$ 38,707

$ 38,318

$ 37,748

Net interest income (FTE)

$ 268

$ 275

$ 275

Taxable Equivalent Adjustment(1)

5

5

4

Total core deposits

$ 23,995

$ 7

0.13%

$ 24,018

$ 7

0.12%

$ 23,117

$ 6

0.10%

Total transactional deposits

10,431

--

0.01%

10,534

--

0.02%

9,599

--

0.02%

Total deposits

27,773

15

0.22%

27,906

14

0.20%

26,764

12

0.19%

Tax equivalent net interest rate spread

2.97%

3.02%

3.25%

Tax equivalent net interest rate margin(4)

3.07%

3.11%

3.33%

(1) Tax equivalent interest income is calculated using a 35% tax rate.

(2) Nonperforming acquired loans include certain lines of credit that are considered nonaccruing.

(3) Does not include a $5.5 million loan that was classified as held for sale at March 31, 2015, which was sold and for which we received the proceeds on April 2, 2015.

(4) Includes acquired loans that were originally recorded at fair value upon acquisition, credit card loans, and loans that have matured which are in the process of collection.

(5) Includes consumer loans, which are considered classified when they are 90 days or more past due. Classified loans include substandard, doubtful, and loss, which are consistent with regulatory definitions, and as described in Item 1, "Business," under the heading "Asset Quality Review" in our Annual Report on 10-K for the year ended December 31, 2014.

(6) Criticized loans includes consumer loans when they are 90 days or more past due. Criticized loans include special mention, substandard, doubtful, and loss.

(7) Carrying value of acquired loans plus the principal not expected to be collected.

(8) Principal on acquired loans not expected to be collected.

First Niagara Financial Group, Inc.

Key Statistics

(Risk weighted assets in millions; share counts in thousands)

2015

2014

2013

March 31,

December 31,

September 30,

June 30,

March 31,

December 31,

First Niagara Financial Group, Inc. capital ratios(1)(2):

Tier 1 risk based capital

10.02%

9.81%

9.82%

9.58%

9.62%

9.56%

Total risk based capital

11.95%

11.75%

11.75%

11.53%

11.60%

11.53%

Common equity tier 1 capital

8.48%

N/A

N/A

N/A

N/A

N/A

Tier 1 common capital(3)

N/A

8.20%

8.19%

7.93%

7.93%

7.86%

Leverage

7.56%

7.50%

7.34%

7.34%

7.28%

7.26%

Equity to assets

10.60%

10.62%

10.79%

13.16%

13.23%

13.27%

Tangible common equity to tangible assets(3)

6.34%

6.30%

6.39%

6.14%

6.07%

6.02%

Total risk weighted assets

$ 28,153

$ 28,186

$ 27,729

$ 27,313

$ 26,638

$ 26,412

First Niagara Bank, N.A capital ratios(1)(2):

Tier 1 risk based capital

10.65%

10.48%

10.41%

10.19%

10.23%

10.15%

Total risk based capital

11.53%

11.37%

11.27%

11.05%

11.08%

10.99%

Common equity tier 1 capital

10.65%

N/A

N/A

N/A

N/A

N/A

Leverage

8.03%

8.01%

7.78%

7.80%

7.74%

7.70%

Total risk weighted assets

$ 28,068

$ 28,146

$ 27,686

$ 27,272

$ 26,595

$ 26,365

Number of branches

393

411

411

411

411

421

Full time equivalent employees

5,322

5,572

5,768

5,874

5,750

5,807

Share information and per share metrics:

Common shares outstanding

353,717

353,388

355,423

355,483

354,127

353,941

Preferred shares outstanding

14,000

14,000

14,000

14,000

14,000

14,000

Treasury shares

12,285

12,614

10,579

10,519

11,875

12,061

Market price (NASDAQ: FNFG):

$ 8.84

$ 8.43

$ 8.33

$ 8.74

$ 9.45

$ 10.62

Book value per common share(4)

10.80

10.71

10.72

13.54

13.40

13.31

Tangible book value per common share(3)(4)

6.78

6.67

6.66

6.32

6.15

6.04

Price/Book

81.85%

78.71%

77.71%

64.55%

70.52%

79.79%

Price/Tangible book(1)

130.38%

126.39%

125.08%

138.29%

153.66%

175.83%

Common stock dividends

$ 0.08

$ 0.08

$ 0.08

$ 0.08

$ 0.08

$ 0.08

Preferred stock dividends

0.54

0.54

0.54

0.54

0.54

0.54

Dividend payout ratio

66.67%

47.06%

N/M

42.11%

53.33%

40.00%

Dividend yield (annualized)

3.67%

3.77%

3.81%

3.67%

3.43%

2.99%

N/M Not meaningful.

(1) Represents an estimate as of March 31, 2015. All preceding quarters represent actual amounts.

(2) Basel III Transitional rules became effective for us on January 1, 2015. Ratios and amounts presented prior to March 31, 2015 are calculated under Basel I rules. As of March 31, 2015, the ratios presented are calculated under the Basel III Standardized Transitional Approach. Common equity tier 1 capital under Basel III replaced Tier 1 common capital under Basel I. Prior to Basel III becoming effective on January 1, 2015, tier 1 common capital under Basel I was a non-GAAP financial measure.

(3) The tables in this earnings release present computation of earnings and certain other ratios using non-GAAP financial measures, which we believe provide investors with information that is useful in understanding our financial performance and position. See Appendix A for further detail.

Reconciliation of net operating income available to common stockholders to net income available to common stockholders(1):

Net operating income available to common stockholders (Non-GAAP)

$ 54,699

$ 53,150

$ 66,462

$ 68,328

$ 61,008

$ 70,143

Nonoperating income and expenses, net of tax:

Restructuring charges

10,861

6,364

1,555

--

8,345

--

Goodwill impairment

--

--

963,267

--

--

--

Deposit account remediation

--

(14,734)

29,233

--

--

--

Total nonoperating income and expenses, net of tax

10,861

(8,370)

994,055

--

8,345

--

Net income (loss) available to common stockholders (GAAP)

$ 43,838

$ 61,520

$ (927,593)

$ 68,328

$ 52,663

$ 70,143

Computation of pre-tax,pre-provision income:

Net interest income

$ 262,944

$ 269,783

$ 273,279

$ 271,812

$ 270,747

$ 280,278

Noninterest income

82,244

77,177

75,392

80,857

76,724

89,312

Noninterest expense

(261,038)

(234,312)

(1,396,825)

(244,115)

(248,736)

(227,148)

Pre-tax, pre-provision income (loss) (GAAP)

84,150

112,648

(1,048,154)

108,554

98,735

142,442

Add back: non-operating noninterest expenses (1)

17,517

(13,934)

1,147,364

--

10,356

--

Pre-tax, pre-provision income (Non-GAAP)(1)

$ 101,667

$ 98,714

$ 99,210

$ 108,554

$ 109,091

$ 142,442

(1) Noninterest expense on an operating basis, net operating income, and pre-tax, pre-provision income on an operating basis are non-GAAP measures that we believe provide meaningful comparisons of our underlying operational performance and facilitates investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, we believe exclusion of these nonoperating items enables management to perform a more effective evaluation and comparison of our results and to assess performance in relation to our ongoing operations.